The International Monetary Fund, Essay Example

“Think globally, act locally” is a watchword of today’s smart businesses. Basically, it means that businesspeople need to stay aware of global situations, while also adapting  to local needs and tastes. This allows the company to better compete in the world market.

An organization can be involved in international trade on a number of levels. One of those is as a direct importer of goods and services and/or a direct exporter of their own goods and services to customers in other countries.  Sometimes this import/export can be handled through a counter-trade agreement in which the goods exported are paid for by imported goods and services in a type of barter agreement rather than one that involves currency exchanges. A second way of exporting is to use an export agent, which eases the red tape and foreign currency issues. The big disadvantage is that the export agent has to make a profit too, which adds to the costs of the transactions, thus raising prices to the customer or lowering profits. Another method of handling international trade is to act as a trading company, an entity which buys goods in one country then sells them to buyers in another country. This requires handling all the details of transporting the goods across international boundaries. Another method is to set up a licensing and/or franchising agreement with companies or agents in other countries. This carries the risk of having licensees or franchisees with low standards of quality. Yet another method is to set up a contract manufacturing arrangement in which foreign organizations manufacture products to specifications, presumably at a lower price than could be achieved domestically. Another option  is outsourcing, where a domestic firms transfer specific tasks to companies in countries with lower labor and/or resources costs. A company can also set up a joint venture or other alliance with a foreign entity. This is useful when the country involved does not permit foreign ownership of plants and companies within their national boundaries. Finally, direct investment is often done by multinational organizations, where they directly own overseas production and/or marketing facilities.

The International Monetary Fund promotes trade among member nations by working to eliminate trade barriers and fostering financial cooperation. It was established in 1947.

When considering doing business in a foreign country, there are serious cultural issues to address. First, is the whole language issue. One of the classic cases was the Chevy Nova, which, when translated  into Spanish became “No va”—which means “does not go”…not exactly the  image Chevrolet wanted their new car to have! Beyond language and  translation issues, there are issues with gestures, personal space, body language, and cultural customs. Family roles also differ from country to country, particularly when advertising to children. It’s also important to respect and observe the national and religious holidays and customs. Even more important, most other countries use the metric system rather than the U.S. measurements.

An absolute advantage in international trade is when one country is the only source of a particular item.  A comparative advantage is when a country specializes in some product and thus can provide it more efficiently or cheaply than it produces other items.